PESTEL Analysis with the Marketing Mix - Essay Example

Institution : xxxxxxxxxxx Title : International Business Report Tutor : xxxxxxxxxxx Course : xxxxxxxxxxx @2010 Introduction For effective analysis of the macro-environment, the identification of factors that affect important variables and influence the supply, demand, and the costs of the organization is very vital. The radical and progressive changes that occur in societies make the environment uncertain which affect the functioning of the organizations. Several checklists are applied to catalogue the numerous issues which affect various organizations (Buckley, 2005). The study centers on PESTEL analysis with particular interest on the economic factors. The global and the national factors of the economy greatly affect all the businesses in terms of their interest rates as well as the fiscal policies and they are set in relation to the prevailing economic conditions. The nature of the economy dictates the behaviors of the organizational stakeholders and consumers with the society. Diagram: PESTEL analysis with the marketing mix Economic factors The economic situations determine the success and the profitability of the organization at a given time period. This is simply because such factors affect the demand, cost, and the capital availability. Such economic factors include the following; the nature of the economic system in a given state, the factor endowment state, socio-economic infrastructure, the economic policies set by the government, the business cycles, inflation rates, exchange rates, and the labour costs (Punnett, 1997). The economic conditions influence the timing as well as the success of various organizational strategies. In case of high growth in the economic sectors, there may be the existence of demand for products and services which will not be the case in very depressed situations. In addition, successful exploitation of the specific strategies, largely rely on the existing demand level within the growth conditions but not in the depressing economic conditions (Daniels, 1997). In an economy that is experiencing recession the level of unemployment will be very high lowering the spending power and loss of confidence by stakeholders, whereas in a booming economy the level of unemployment is very raising the spending power with increased confidence among the stakeholders. Although, the depressed economy may appear to be a threat to a nation as it forces various organizations to quit the business, in most cases it creates opportunities for other organizations (Kauser, 2004). Political and governmental policies are greatly influenced by the economic situations, this in turn affect the decisions made by the government. The government decisions such as; issues of exchange rates directly or rather indirectly affect organizations in several ways, resulting into opportunities and the threats for organizational analysis. The interest rate is set in accordance to the existing economic conditions and the targeted inflation rate (Welch, 2004). Availability of inflationary pressures within the economy, leads to an increase in the interest rate levels and such rates are always predicted to increase depending on the stated forecast figures. This affects the borrowing and as a result retards the economic growth of the organizations and the respective nations at large. As much as there are relations between the economic conditions and with government policy, the two influence several other environmental factors that affect the entire organizations (Daniels, 1997). The existing economic conditions drive the capital markets which are usually controlled by the government. Such capital markets establish some conditions for the various funding ways of any organization. The charged interest rate on loans is very much affected by the inflation as well as international economies, although, such influential rate may have been fixed by the central bank. The government spending may raise the supply of money and then influence the capital market to be more buoyant. This will extensively affect the shareholders’ expectations in relation to the performance of the organizations since it will affect their interest in equity funding provisions or rather the sale of their shares (Thompson, 2002). Effective respond to the economic situations and the behaviors of the stakeholders, makes an organization to be successful in achieving its objectives. Therefore, it is very important for the organizations to review the effects of the economic conditions on their respective competitors and act accordingly (Allen, 2004). Given the global nature of the business, most organizations are largely affected by the economies worldwide. For instance; the globalized credit crunch from the USA, influenced the credit crunching in the UK between the year 2007 and 2008. The presence of specific skills at the regional as well as the national levels is reflected in the labour market. The labour market is greatly affected by the training level that is under the influence of the government and some of the regional agencies. The labour costs are as well influenced by the existing general trends of some other organization and inflationary conditions, this work in association with the power of the available trade unions (Allen, 2004). In the developing countries, the cheaper labour greatly affects the product competition from the developed countries. The organizations which intend to remain on the competitive edge should be conversant with the economic conditions throughout the entire borders of the economy. Therefore, such organizations should consider the application of strategies that effectively promote as well as guard its business at any given economic conditions in the word. The table below indicates examples of economic factors Economic factors Economic growth Interest rates & monetary policies Government spending Unemployment policy Taxation Exchange rates Inflation rates Stage of the business cycle Consumer confidence The main importance of the economic factors in relation to other factors, depend very much on the specific positions of the business (Daniels, 1997). For instance; the exchange rate changes may seem to be of critical value to the multinational and less important to the local organizations. Although, the economy is very vital to the entire organizations particularly on the supply and the demand, the relative significance of specific economic features as well as the related economy in comparison, their respective regulations, and the social trends varies. The economic activity level in conjunction with education, the control level of the government and the infrastructures, virtually affect the entire modes of running the business. It is important for the organizations to understand such environment in order for it to operate successfully across the globe (London, 2004). Conclusion It is important to note that international and the national factors of the economy significantly affect all the businesses in terms of their interest rates as well as the fiscal policies and they are set in relation to the prevailing economic conditions. The nature of the economy dictates the behaviors of the organizational stakeholders and consumers with the society. Effective response to the existing economic conditions and the behaviors of the respective stakeholders makes an organization to be successful in achieving its objectives. The main significance of the economic factors in comparison to other factors, depend largely on the specific positions of the business. Bibliography Thompson, J. (2002), Strategic Management, 4th Edition, London: Thomson. Allen, D., (2004), Preparing for a New Global Business Environment: Divided and Disorderly or Integrated and Harmonious, Journal of Business Strategy, Vol.25, no. 5, 16–25. Buckley, P.J., (2005), what is International Business? Basingstoke, Hampshire; New York, NY: Palgrave Macmillan. Daniels, J.D., (1997), International Business: Environments and Operations. Reading, MA: Addison-Wesley. Kauser, S., (2004), The Influence of Behavioural and Organizational Characteristics on the Success of International Strategic Alliances, International Marketing, Vol.21, no. 1, 17–52. London, T., (2004), Reinventing Strategies for Emerging Markets: Beyond the Transnational Model, Journal of International Business Studies, Vol.35, no. 5, 350–370. Punnett, B.J., (1997), International Business. Cambridge, MA: Blackwell Publishers. Welch, C., (2004), The Political Embeddedness of International Business Networks, International Marketing, Vol.21, no. 2, 216–231. Appendices The marketing planning process is summarized in the diagram below: The balanced scorecard approach to performance measurement is summarized below Read More